24/7 Real Media Is Considering "Strategic Alternatives"

| About: 24/7 Real (TFSM)

Now it is official: 24/7 Real Media (TFSM) is for sale. The online marketing firm yesterday disclosed that it had hired Lehman Brothers as a financial adviser to assess “strategic alternatives.”

In recent weeks, the shares have spiked in the wake of the acquisitions of DoubleClick by Google (NASDAQ:GOOG) and Right Media by Yahoo (YHOO). There have been reports that 24/7 could be a target of WPP Group (NASDAQ:WPPGY) or Microsoft (NASDAQ:MSFT).

The disclosure was included in the company’s first quarter earnings release. Results for the quarter were a little light of expectations: 24/7 reported revenue of $57.7 million and pro forma EPS of 8 cents a share, shy of the Street consensus of $58.74 million and 10 cents. For the second quarter, the company sees revenue of $61 million to $65 million, and pro forma EPS of 9-12 cents; the consensus has been $63.29 million and 13 cents.

For the full year, the company sees revenue of $265 million to $275 million, with pro forma EPS of 52-55 cents a share; the Street has been looking for $262.07 million and 52 cents.

Youssef Squali, an analyst with Jefferies & Co., downgraded the stock today to Hold from Buy, while keeping his price target at $12. “While the stock is likely to trade up short-term on the prospects of a sale,” he wrote, “we find the stock fundamentally relatively fairly valued.”

Squali says he considers the possibility of a Microsoft deal “diminished” by the weak 24/7 results and by ongoing talks on potential alliances between Microsoft and Yahoo. “To be sure, we still see TFSM as a very attractive take-out candidate for a large media company or advertising agency,” he writes. “Having said that, we believe Microsoft would have been willing to pay a higher premium compared to other bidders, given its determination to own a quality online ad asset and its losing streak in chasing M&A deals recently.”

Today, 24/7 shares are up 20 cents at $11.30, for a market cap a little over $570 million.

TFSM 1-yr chart:
tfsm may 07

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